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February 1, 2011

Not exactly what one would term a cold case, the October Surprise of 2008, but much has changed as we look back on it. It was that Sunday, October 12, 2008, that we heard this dire warning from Dominique Strauss-Kahn, head of the International Monetary Fund (IMF):

The world financial system is teetering on the "brink of systemic meltdown".

The BBC further reported:
Mr Strauss-Kahn was speaking in Washington after talks with US President George W Bush, G7 finance ministers and the World Bank. Earlier, G7 ministers had released the five-point plan to free up the flow of credit, back efforts by banks to raise money and revive the mortgage market.

"Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown," said Mr Strauss-Kahn.

He later told a news conference: "The first co-ordination between advanced countries and the rest of the world is now on track." The IMF chief's strong words reflect a belief that the global financial crisis can be contained, says the BBC's economics correspondent Andrew Walker in Washington.

Mr Strauss-Kahn was joined at the White House by finance ministers from the US, Canada, France, Germany, Britain, Italy and Japan, as well as World Bank President Robert Zoellick. Following talks with the economic leaders, Mr Bush also pledged co-ordinated action, saying it was serious global crisis which demanded a serious global response.

Panic selling
The meeting came a day after Asian, European and US markets continued to panic sell despite rate cuts and cash injections by central banks, amid widespread fears of a global recession.

Late on Friday, US Treasury Secretary Henry Paulson said the US planned to invest directly in banks for the first since the 1930s, following a similar UK programme of partial bank nationalisation.

The G7 had earlier not ruled out adopting another part of the British plan - to guarantee borrowing between banks - as they issued their plan in Washington. The G7 also left the door open to further reductions in interest rates, which six central banks this week jointly cut by half a percentage point. But our correspondent says there is some disappointment that the G7 plan lacks detail. Ahead of the emergency summit of eurozone leaders, UK Prime Minister Gordon Brown will hold talks with Mr Sarkozy. Chancellor Merkel said governments must "redirect the markets so they serve the people, and not ruin them". The heads of the EU's four biggest economies - Britain, France, Germany and Italy - held a first crisis summit last week, but were split over the need for a common plan.

Analysts say another week of plunging stock markets has focused minds and the real test of this weekend's scramble by world leaders to shore up the international financial system will come once markets reopen again on Monday.
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UPDATES

Still warning of war but for other reasons, the Socialist Party IMF's chairman's name appeared in news stories again today:

Feb. 1, 2011The International Monetary Fund stands ready to help riot-torn Egypt rebuild its economy, the IMF chief said Tuesday as he warned governments to tackle unemployment and income inequality or risk war.

Dominique Strauss-Kahn also said rising food prices could have "potentially devastating consequences" for poorer nations, and warned that Asia's fast-growing economies faced a risk of a "hard landing".

Overall, according to the IMF managing director, widening imbalances across and within countries were sparking tensions that threaten to derail the fragile global economic recovery -- and could even spark armed conflict.